The US majors have been talking about the possibility of ‘toll-free’ mobile data services for some time as they seek more creative ways to maximize their revenues from their new LTE networks. Now, comments from both Verizon and AT&T suggest these will soon be a reality.
Toll-free systems have the advantage of transferring charges from the consumer ‘ rarely willing to increase their spend, even for faster speeds or new services ‘ to the content or application provider. The latter pays a fee to the cellco more mobile usage, sometimes for getting a good quality of experience for their service (though in the US that has to steer clear of net neutrality rules), while that usage is exempted from the consumer’s data allowance, appearing to be a ‘free’ value-add.
Verizon Communications’ CFO Fran Shammo told a Barclays investor conference this week that
content providers were starting to see the attraction of such systems, which are comparable to toll-free 800 services on the voice side. “The content providers will be willing to pay for the content, if we don’t charge the consumer,” he said, because Verizon can potentially deliver ‘100m eyeballs’ across its various channels.
Shammo insists this does not fall foul of net neutrality limitations, arguing the proposed deals are about who pays for content delivery, not about prioritizing one service over another. But neutrality advocates argue that toll-free tariffs will favor large content companies, and that they will prove that carriers data caps ‘ justified in order to prevent network overload and ensure a good experience for all users ‘ are artificial and unnecessary.
Shammo’s comments came hard on reports that Verizon Wireless was engaged in talks about a toll-free deal with sports giant ESPN, and they follow similar musings made a week earlier, at a JP Morgan technology investor event, by AT&T CEO Randall Stephenson. He said he expected content and app developers to introduce new models soon, allowing their customers to access content without racking up high data bills. As well as direct payments to carriers, content firms could also subsidize data costs through advertising revenue share, Stephenson said. It was not clear whether he meant simply inserting ads in the content which users will get for free, or whether he is envisaging a cut for AT&T of revenue generated by adverts on services such as YouTube.
‘We are very actively exploring those opportunities and looking at every way to build value for our customers,’ Verizon Wireless Daniel Mead said at yet another investor conference sponsored by Jefferies Group. He said Amazon’s famous deal to include free 3G connectivity in its early Kindle ereaders, paying the cellco a fee for the mechanism by which it delivered its books, had proved an early model for the new wave of negotiations with content partners.